Japan’s Economic Outlook for Fiscal Years 2022 to 2024 (November 2022)

Economic Research Department Executive Research Fellow Taro Saito

■Summary

<Real GDP growth: 1.6% in FY 2022, 1.0% in FY 2023, 1.6% in FY 2024>

In the July–September quarter of 2022, real GDP contracted by an annualized rate of −1.2% from the previous quarter. However, this does not mean that the economy is deteriorating, as the main cause is the deterioration of external demand due to a substantial increase in imports. In the October–December quarter, positive growth is expected to be led by domestic demand, mainly in private consumption and capital investment.
Real GDP is expected to grow 1.6% in FY 2022, 1.0% in FY 2023, and 1.6% in FY 2024. Growth in FY 2023 will decline, mainly due to a decline in exports following the recessions in Europe and the United States. The current scenario indicates that the recovery trend will be maintained. However, if the recessions in Europe and the United States deepen, Japan will also inevitably face a recession.
Other downside risks include China’s economic downturn due to its continued zero-COVID policy, limited economic activity due to electricity shortages, and uncertainty regarding policy responses to the spread of COVID-19.
Consumer price inflation (excluding fresh foods) will rise to the upper 3% range toward the end of 2022 and then fall to the 2% range in 2023 due to the impact of policy measures to combat inflation. We forecast 2.7% in FY 2022, 1.8% in FY 2023, and 1.2% in 2024. It is estimated that the impact of the policy measures on consumer price inflation will be −1.0% in FY 2022, −0.5% in FY 2023, and +0.3% in FY 2024.

Changes in real GDP growth rate (fiscal year)

■Index

1. Negative growth of annualized rate of 1.2% in July–September 2022
　　・The slowdown of overseas economies becomes clear
　　・Effects of Policy Measures Against Inflation
2. Real growth expected to be 1.6% in FY 2022, 1.0% in FY 2023 and 1.6% in 2024
　　・Summer 2022 consumption remained firm even during the COVID-19 outbreak
　　・The environment surrounding wage increases has improved significantly
　　・Real GDP will surpass its most recent peak in FY 2024.
　　・Price outlook